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To What Extent Can CMS Informally Issue Interpretive Rules?

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Law360October 17, 2018Robert E. Wanerman

Robert E. Wanerman, Member of the Firm in the Health Care & Life Sciences practice, in the firm’s Washington, DC, office, authored an article in Law360, titled “To What Extent Can CMS Informally Issue Interpretive Rules?” (Read the full version – subscription required.)

Following is an excerpt:

On Sept. 28, 2018, the U.S. Supreme Court granted certiorari to review the decision of the D.C. Circuit in Allina Health Services v. Azar, which has the potential to resolve the issue of whether or not the Medicare Act requires notice-and-comment rule-making in more situations than are required by the Administrative Procedure Act. The D.C. Circuit held that 42 U.S.C. § 1395hh requires notice-and comment rule-making more often than the APA, and that the secretary of the U.S. Department of Health and Human Services failed to comply with that statute. Allina will deal with the extent to which the Centers for Medicare & Medicaid Services is entitled to issue interpretive rules on an informal basis, which has become a common practice.

It has been 43 years since the Second Circuit observed that the distinction between substantive regulations that require notice-and-comment rule-making and informal interpretative rules or policy statements that do not is “enshrouded in considerable smog ...” In the intervening years, federal courts have struggled to find a clear set of principles to distinguish between the two under the APA. This issue is especially relevant for the Medicare program; each year, CMS makes thousands of decisions affecting coverage and reimbursement, and acts through formal regulations as well as multiple forms of subregulatory publications. If CMS gets it wrong, stakeholders may be deprived of their right to participate in the rule-making process and may be adversely affected.

Since 1987, CMS has been obligated to follow notice-and-comment rule-making procedures whenever a “rule, requirement, or other statement of policy ... establishes or changes a substantive legal standard governing the scope of benefits, the payment for services, or the eligibility of individuals, entities, or organizations to furnish or receive services or benefits under this subchapter ...” Congress also specified that if the secretary publishes a final regulation that is not the logical outgrowth of a proposed regulation or interim final rule, the final regulation is deemed to be a proposed regulation and cannot take effect until the secretary has complied with notice-and-comment rule-making. The unresolved question is whether or not this statute follows the APA’s exemption of interpretive rules and statements of policy from notice-and-comment rule-making, or whether its text requires notice-and-comment rule-making more often than the APA.